The coal policy certainly recognises the importance of energy in our economic growth and the government has initiated a few measures to support implementation. The scheme provides incentives and institutional support to expedite mine development and production. The stakeholder consultation may address some current hurdles in, say, land acquisition, stamp duty or transport connectivity that may allow speedier development, states Kameswara Rao, Leader Energy, Utilities and Mining, PwC India.
What do you see as some of the important benefits of the present coal auctions? At a fundamental level, the coal auctions introduce local competition, which means coal consumers have more sourcing options and a better control on quality. As it displaces imported coal and other marginal supplies, the landed cost of energy will reduce for large industrial consumers.
The positive impact of these auctions is much wider. The provision to surrender a block without penalty can attract much needed high-risk investment into exploration. The state governments will benefit from coal mining activity and associated energy-led development such as urbanisation, setting up of energy intensive industries, etc.
To meet the demands of India's growing economy it will be imperative to also ensure the early commencement of production and development of a robust market. Is the policy cognisant of these realities?
The policy certainly recognises the importance of energy in our economic growth and the government has initiated a few measures to support implementation. The scheme provides incentives and institutional support to expedite mine development and production. The stakeholder consultation may address some current hurdles in, say, land acquisition, stamp duty or transport connectivity that may allow speedier development.
The current auction is a big step towards commercialisation of the sector. A more competitive market will need further work, such as setting up an exchange and unwinding of past contracts, which may come gradually over a longer period of time.
To what extent will the commercialisation of mining help in reducing the country's dependence on imported coal and help in achieving the goal of aatmanirbharta or self-reliance?
It would be sub-optimal to look at commercialisation through the lens of reducing import dependence. The gains, as discussed earlier, are more fundamental to the mining and end-use industries.
The auctions will, however, drive down imports. The output from these 40 commercial coal blocks will be 200-250 MTPA which will clearly make a dent in our imports of 249 MT (comprising coking coal of 52 MT and thermal coal of 197 MT). The captive block auctioned earlier will also displace some of imports when they come into production. On the other hand, India is expected to need more energy supplies as demand picks up. This includes an increase in coking coal imports as domestic steel capacity and production grows.
Although Coal India will continue to be the world's largest producer of the commodity, what will be the role of private players?
It does not make sense to look at the industry in different groups. All coal producers are expected to invest in process improvement, new digital technologies, skill development and commercialisation. The new entrants are likely to displace marginal suppliers such as imports and high-cost producers as well as target non-regulated sector by offering better value and supply security. Given this, and the expected growth in energy demand in the medium term, both the new and current coal suppliers are likely to benefit equally from the commercialisation process.
How will the proposed rationalisation of coal linkages by the government help in the long-term?
The administrative award of linkages accumulated into considerable inefficiency in logistics. The clean-up was necessary and was already done for the power sector. It makes sense to expedite its implementation in the non-regulated, too, to reduce bottlenecks and costs in logistics movement.
Do you perceive any improvement in obtaining environmental clearances by the coal mining companies?
This depends on specific cases and preparedness. General observation cannot be made. Having said that, the current coal mining auctions will benefit from the recent amendments in the Mineral Laws Amendment Act, 2020, and Environmental Protection Act, 2020, as well as the project oversight mechanism proposed by the government.
Very quickly, what do you see as the most notable pending or emergent challenges before the industry?
The resources industry, globally, has suffered from significant changes in regulation and cost of doing business. The uncertainty and risks make it harder to raise equity and secure loans. The central and state governments can play a positive role in developing common infrastructure, reforming the regulatory framework and supporting the industry, which is key to our social and economic development.